As the June 12 initial public offering for SpaceX approaches, most ETF issuers are racing to capture the wave of investor demand. But Joel Shulman, CEO and chief investment officer of ERShares, is taking a markedly different approach: turning away hundreds of millions of dollars in new money.
This week, ERShares halted new creation unit issuance for its Private-Public Crossover ETF (Nasdaq: XOVR) and imposed a redemption fee of up to 2% effective on IPO day. Shulman said the firm has already rejected approximately $400 million in inflows over the past day alone, and could have raised an additional $1 billion to $2 billion if it had chosen to promote the fund's 13% allocation to SpaceX.
Shulman said the decision is rooted in fiduciary duty rather than contrarianism. XOVR holds more than $300 million in SpaceX exposure, its largest private holding, accumulated via a special purpose vehicle. That position has already generated roughly $50 million in unrealized gains ahead of the listing. Shulman's concern is that a flood of new money just before the IPO would dilute the percentage exposure that existing shareholders have built up, reducing the benefit of the firm's long-term conviction play. "Then they don't get the return that they were hoping to get," he said.
The 2% redemption fee is designed to discourage investors who might enter the fund to capture gains on IPO day and then exit quickly. Shulman pointed to other fund managers that absorbed billions of dollars in "hot money" around high-profile IPOs, only to see that capital vanish just as rapidly. In January, when the fund's SpaceX position was much smaller, Shulman said the firm faced a similar situation as $1.4 billion arrived from five to ten large block trades over five days. The fund turned it away, effectively giving up roughly $1 million per month in management fees.
ERShares' approach to SpaceX reflects a broader investment framework applied for more than two decades. The firm's Entrepreneur 30 Total Return Index, which underpins XOVR, uses what Shulman describes as a "VC lens"—18 attributes developed partly during his research at Harvard—to identify founder-led public companies with venture capital characteristics before they gain mainstream recognition. The firm purchased Nvidia in 2005 at approximately $5 per share and has held it for 21 years. It also picked up Alphabet, Tesla, and Meta at or near their respective IPOs.
Shulman argues that SpaceX fits that mold with multiple growth engines: space launch, Starlink's telecom cash flow, and the optionality of placing data centers in orbit. He noted that Elon Musk's net worth already exceeds the combined net worth of Sergey Brin, Jeff Bezos, Mark Zuckerberg, and Jensen Huang—even before the SpaceX offering. "When an entrepreneur—forget arguably the greatest in the history of the planet—goes up against a bureaucrat like the telecoms, which are arguably the most bureaucratic companies on the planet, it's game over," Shulman said.
SpaceX's IPO filing includes a two-class share structure: Class A shares, sold to the public, carry one vote each; Class B shares carry ten votes. Musk, who serves as founder, CEO, CTO, and chairman, would retain control over essentially all matters requiring shareholder approval. Senator Elizabeth Warren has called on the SEC to delay the debut given the "uniquely checked" power Musk would enjoy.
Shulman is bullish on the IPO's first-day performance, projecting the stock could open 10% to 20% above its $135 IPO price and end the first trading day up more than 25%, reaching $165 to $170. Within the first week, he would not be shocked to see the stock approach $200, implying a market capitalization above $2 trillion. An anonymous source told Reuters that the SpaceX IPO has already drawn more than $250 billion of investor demand, eclipsing the $75 billion raise the company is targeting.
Index buying pressure is also expected to provide a floor. The Nasdaq 100 and Russell 1000 are both expected to add SpaceX as a constituent within two weeks of the listing. The Nasdaq 100 alone has between $500 billion and $1 trillion tracking it, and SpaceX is expected to carry a roughly 6% weight based on its market capitalization relative to Tesla's current 5% weight. That translates to an estimated $25 billion to $35 billion in forced buying pressure against a float of approximately $75 billion to $78 billion. "The indices provide a floor," Shulman said. For advisors seeking to understand the broader landscape, see ETF Issuers Rush to Launch Leveraged Funds Tied to SpaceX's $1.75 Trillion IPO and SpaceX, OpenAI, Anthropic IPOs Loom: Advisors Weigh Entry Timing and Valuation Risks.
